RE: Public Comment Invited to Help Develop State Plan to Improve Local Water Health in Chesapeake Bay Watershed Counties

The undersigned members of the Choose Clean Water Coalition submit the following comments to help inform the Commonwealth of Pennsylvania’s Department of Environmental Protection (DEP or Department) about how best to develop and implement the Phase III Watershed Implementation Plan (WIP).

It is no small secret that Pennsylvania is off-course in meeting its portion of the nutrient and sediment goals established in the Chesapeake Bay Total Maximum Daily Load (TMDL). In fact, “Pennsylvania is only about 10 percent of the way towards its 2025 nitrogen goal, and thus about 35 percent below its 2015 target.” (EPA Expectations for Pennsylvania’s Phase III WIP, April 27, 2017, p. 1)

The Department has solicited input regarding the planning, drafting, and implementation of the Phase III WIP. The undersigned members of the Choose Clean Water Coalition assert that in order to forge a path toward achieving local and Bay-wide water quality goals, the Commonwealth must:

● be realistic in its ability to provide funding for Department staff and restoration initiatives;● include more detail and documentation in the portions of the WIP related to agriculture;● include a frank assessment of whether or not the Department has the programmatic capacity necessary to implement the Phase III WIP and underlying restoration strategy;● include and engage local partners in the planning and implementation of WIP III, particularly conservation districts;● target financial and staff resources to the Southcentral tier of the state where agricultural pollution is most profound and where water quality improvements will have the most impact upon Bay restoration efforts;● increase the quantity of inspections completed;● require agricultural operations to fully implement their planning documents;● focus on installation of efficient and effective best management practices;● prohibit the land application of manure in the winter; and,● require all farming operations to submit reportable information related to farm practice and best management practices to DEP or the County Conservation District.

Funding

All parties involved understand that these are tough budget times in which we are operating. While there has been much talk about the state legislature passing a water usage fee or a new iteration of Growing Greener, neither is on the cusp of passage and should therefore not be relied upon when the Commonwealth is in the planning phase of WIP III. EPA expects the Commonwealth to “coordinate with EPA to perform resources workload model analyses in 2017 [to] determine if there are sufficient resources to implement the Commonwealth’s core state regulatory programs, and in 2018 to determine if there are sufficient resources to meet the Commonwealth’s Chesapeake Bay Phase III WIP implementation needs.” (EPA Expectations for Pennsylvania’s Phase III WIP, p. 5) EPA has also instructed the Commonwealth that any Chesapeake Bay funding provided by EPA for implementation of best management practices should only be applied to projects in priority watersheds in the Susquehanna and Potomac River watershed. (EPA Expectations for Pennsylvania’s Phase III WIP, p. 5)

Agricultural Sector

EPA has stated that it expects the Commonwealth’s Phase III WIP to contain more detail and documentation related to the Agriculture Sector because that sector is under backstop actions and oversight by EPA. EPA has also provided the Commonwealth with “state-specific expectations for jurisdictions and pollutant sectors which are under enhanced or back-stopped levels of federal oversight. . . .” (EPA Interim Expectations, p. 8) The Commonwealth’s Phase III WIP must address gaps in programmatic capacity aimed at addressing “the financial cost share, technical assistance, and regulatory oversight capacity to deliver agricultural conservation practices at levels consistent with those projected as needed to achieve their Phase III WIP agricultural sector load reductions.” (EPA Interim Expectations, p. 2) First and foremost, the Phase III WIP must document programmatic and policy changes needed to “[e]nsure compliance with and full implementation of state nutrient and sediment pollutant load reduction regulations.” (EPA Expectations for Pennsylvania’s Phase III WIP, April 27, 2017, p. 3) The Phase III WIP must also include a discussion of implementation incentives meant to encourage nutrient management planning and other priority best management practices. (EPA Expectations for Pennsylvania’s Phase III WIP, April 27, 2017, p. 3) The Commonwealth also needs to identify and address the Department’s lack of programmatic capacity and failure to track best management practices. (EPA Interim Expectations, p. 2) EPA notes that jurisdictions should consider corollary benefits of best management practices targeted for implementation, such as addressing other environmental issues, improving wetlands, increasing forest buffers in addition to water quality benefits of a practice. (EPA Interim Expectations, p. 3)

Local Engagement

EPA has stated quite explicitly that local partners must be engaged in both the WIP III planning process and implementation of strategies and practices. (EPA Interim Expectations, p. 3) “A significant and integral driver towards restoring local waters within the Chesapeake Bay watershed and meeting the goals of the 2010 Chesapeake Bay Total Maximum Daily Load (Bay TMDL) is active engagement and participation from local partners, such as local governments, conservation districts, planning districts, municipalities, federal facilities, watershed organizations, source water protection groups, private businesses, and local elected officials.” (Chesapeake Bay Program Partnership’s Phase III WIP Stakeholder Assessment Action Plan, 2016, p. 1) The Bay Program has stated that “the Phase III WIPs should help local partners understand their contribution to achieving water quality improvements and clearly articulate who will be held accountable for following through on Phase III WIP implementation.” (Chesapeake Bay Program Partnership’s Phase III WIP Stakeholder Assessment Action Plan, 2016, p. 1)

The Bay Program recommends including local partners in discussions and decisions about who will take responsibility for which load reductions, from planning to implementation. (Chesapeake Bay Program Partnership’s Phase III WIP Stakeholder Assessment Action Plan, 2016, p. 9) “A justification of the distribution should be provided in terms of equity, practicality, or cost-effectiveness.” (Chesapeake Bay Program Partnership’s Phase III WIP Stakeholder Assessment Action Plan, 2016, p. 10) The Bay Program has stated that merely allocating load reduction responsibility to a local partner is not acceptable. (Chesapeake Bay Program Partnership’s Phase III WIP Stakeholder Assessment Action Plan, 2016, p. 9) Within the Phase III WIP, the Commonwealth must “demonstrate collaboration” with and among it partners, not merely set directives for them to follow. (EPA Expectations for Pennsylvania’s Phase III WIP, April 27, 2017, p. 2)

In addition to engaging local partners, the Phase III WIP must describe in detail how local planning goals below the state-major basin scales will be achieved. (EPA Interim Expectations, p. 1) “A recommendation is to engage those at the county level first to gain an understanding of the process of determining their fair share of the allocation and what they need to do in order to meet that target.” (Chesapeake Bay Program Partnership’s Phase III WIP Stakeholder Assessment Action Plan, 2016, p. 9) The Choose Clean Water Coalition supports county level planning goals in PA, with emphasis on the Southcentral part of the state with respect to the agricultural sector. If agriculture continues to lag behind in meeting its sector goals, DEP should assign individual cap loads to agricultural operations. A permitting program would be needed to capture all farming operations, but this would be a fair and equitable way to ensure that all farms are doing their part to meet the sector load. DEP has suggested that it would consider such a program. (A DEP Strategy to Enhance Pennsylvania’s Chesapeake Bay Restoration Effort, January 21, 2016, p. 29)

To demonstrate commitment to inclusion of local partners, the composition of Pennsylvania’s Steering Committee for the Phase III WIP must be adjusted to include more local partners. The Choose Clean Water Coalition suggests that directors of Conservation Districts in the Southcentral tier of the state should be added to the Steering Committee, particularly those from Cumberland, Adams, York, Lancaster, and Lebanon Counties. Pennsylvania’s Steering Committee for the Phase III WIP is comprised completely of state agency or quasi-agency officials. There are no county or local government officials represented on the Commonwealth’s Steering Committee for the development of the Phase III WIP. (Pennsylvania Chesapeake Bay Phase 3 Watershed Implementation Plan (WIP), Steering Committee Meeting Minutes, April 3, 2017) Additionally, there is no representation on the Steering Committee by EPA. Failure to include EPA in discussions about how the Commonwealth could reach its Bay TMDL sector loads is a missed opportunity for guidance about whether the chosen path will be accepted by EPA as sufficient, especially in light of EPA’s enhanced oversight of the Commonwealth for both agriculture and stormwater.

Require Implementation of Planning Documents

In order to create the culture of compliance that the Department seeks from agricultural operations, DEP is going to have to require farm operators to implement their nutrient and sediment control plans. “Inspection and verification activities related to agricultural . . . sources have been a missing piece in creating a culture of compliance with existing regulatory requirements, and documenting pollutant reductions necessary to meet our targets. If these basic functions of BMP documentation and verification of compliance are not given their proper role, Pennsylvania’s performance in meeting water quality goals and Bay performance measures will continue to seriously lag.” (A DEP Strategy to Enhance Pennsylvania’s Chesapeake Bay Restoration Effort, January 21, 2016, p. 1) First and foremost, DEP must increase the number of agricultural inspections it is completing in order to address pollutant reduction deficiencies. (A DEP Strategy to Enhance Pennsylvania’s Chesapeake Bay Restoration Effort, January 21, 2016, p. 2)

EPA has set a goal for jurisdictions to inspect 10 percent of farms in the Chesapeake Bay Watershed annually, and the Pennsylvania Department of Environmental Protection has made a commitment to meet that goal within the Commonwealth’s portion of the Bay watershed. (A DEP Strategy to Enhance Pennsylvania’s Chesapeake Bay Restoration Effort, January 21, 2016, p. 2) In 2014, DEP completed 592 farm inspections which is only 1.8 percent of the farms in the Commonwealth’s portion of the Bay watershed. That is only 17.6 percent of EPA’s required level of inspections, well below the 3,360 that EPA anticipates being inspected annually. (A DEP Strategy to Enhance Pennsylvania’s Chesapeake Bay Restoration Effort, January 21, 2016, p. 13) DEP completed even fewer inspections of agricultural operations in 2016. In 2016, DEP and Conservation Districts had only completed approximately 500 inspections of farming operations. (Agriculture Initial Inspection Update, Presentation to Ag Advisory Board, April 27, 2017)

PA DEP’s strategy thus far for agricultural inspections, thus far, has been to require each County Conservation District Chesapeake Bay Technician under contract with DEP to do “50 Manure Management and Agricultural E&S Plan inspections, supplemented with an unfunded BMP data collection activity.” (A DEP Strategy to Enhance Pennsylvania’s Chesapeake Bay Restoration Effort, January 21, 2016, p. 9) PA DEP’s strategy has focused exclusively on whether farms have planning documents and locating and quantifying previously undocumented best management practices. DEP’s directive to Conservation District staff has been to focus on assuring “that everyone who is required to have plans to be in regulatory compliance has all the necessary plans applicable to their farming operation.” (A DEP Strategy to Enhance Pennsylvania’s Chesapeake Bay Restoration Effort, January 21, 2016, p. 9) Of the farms inspected in 2016, 64 percent had an administratively complete Manure Management Plan (MMP) while only 60 percent had an administratively complete Agricultural Erosion and Sediment Control Plan (Ag E&S Plan). (Agriculture Initial Inspection Update, Presentation to Ag Advisory Board, April 27, 2017)

DEP has completely ignored making a determination as to whether those plans have been implemented. DEP has specifically directed Conservation District staff to only seek confirmation that plans are in place, but staff should not seek to make a determination as to whether a farming operation is in compliance with those planning documents. This is completely contradictory to EPA’s directive to implement planning requirements and BMPs. DEP’s Standard Operating Procedure for farm inspections states that “[i]nspections do not include inspection of waste management systems, production areas, barnyards and other animal housing areas, or Best Management Practices (BMPs).” (Standard Operating Procedure, Chesapeake Bay Agricultural Inspection Program, SOP No. BCW-INSP-018, Version 1.0, Final, May 27, 2016, p. 14) The undersigned members of the Choose Clean Water Coalition believe it is the duty and obligation of DEP and Conservation District staff inspecting farming operations to make a determination about BOTH compliance with planning requirements AND implementation of MMP and Ag E&S Plans.

Geographic Targeting of Resources

The Commonwealth must target financial and staffing resources to specific geographic areas where “accelerated restoration efforts are needed and where local governments are receptive towards making a discernable difference in their community in meeting their WIP commitments.” (Chesapeake Bay Program Partnership’s Phase III WIP Stakeholder Assessment Action Plan, 2016, p. 4) As discussed at the PA Steering Committee meeting on April 3, 2017, “[t]argeting should factor into each workgroup’s discussion. Where BMPs are placed is as important as what, when[,] and how they are implemented.” (Pennsylvania Chesapeake Bay Phase 3 Watershed Implementation Plan (WIP), Steering Committee Meeting Minutes, April 3, 2017) Given the lack of financial resources for the restoration effort, the Commonwealth must focus funding and staffing where it can most effectively and efficiently “maximize nutrient and sediment pollutant load reductions.” (EPA Expectations for Pennsylvania’s Phase III WIP, April 27, 2017, p. 2) EPA has stated that the Commonwealth’s Phase III WIP should prioritize areas in the Susquehanna and Potomac River watersheds where restoration efforts will have the most impact on the Bay and where local water quality improvement can be achieved. (EPA Expectations for Pennsylvania’s Phase III WIP, April 27, 2017, p. 2) EPA has stated that the Commonwealth should utilize available information and tools that assist “in identifying sources of nutrients and sediment, determining appropriate practices that reduce pollution flows, and calculating costs associated with selected actions. . . .” (EPA Expectations for Pennsylvania’s Phase III WIP, April 27, 2017, p. 2) EPA acknowledges that programs and practices may need to be targeted to certain geographic areas in order to more effectively and efficiently reduce pollutant loads. (EPA Interim Expectations, p. 2). Accordingly, the Commonwealth should focus agricultural pollutant reduction programs and practices on the Southcentral tier of the state in which the majority of agricultural operations exist.

DEP’s compliance efforts thus far have been spread across the watershed fairly even, based upon location of Chesapeake Bay Technicians at Conservation Districts that have a memorandum of understanding to complete work on behalf of DEP. However, the effort should be more heavily targeted toward the Southcentral tier of the state, given the total agricultural loading to the Bay coming from that region. DEP should either contract for more Conservation District staff in those areas or target the efforts of its staff geographically to the Southcentral Regional Office with respect to agricultural enforcement. EPA has suggested that it would be appropriate for jurisdictions to contract with third parties to provide services that are central to the implementation of the WIP. (EPA Expectations for Pennsylvania’s Phase III WIP, April 27, 2017, p. 4) Thus, DEP could contract with third parties to perform agricultural data collection and reserve staff for farm inspections related to plan implementation or pollution related discharge events.

Additionally, Conservation District Watershed Specialists should be utilized to facilitate restoration projects in impaired waters. This adjustment to job responsibilities was previously discussed by the Department and would be a better use of resources to achieve water quality improvements in each county. DEP has stated that the Department should “[i]mplement targeted efforts in impaired watersheds where the cause listed is . . . agriculture . . . and where geography and land use are amenable to successful BMP implementation. . . . These watersheds should be in an area where there is an interested local group ready to take the lead on implementation.” (A DEP Strategy to Enhance Pennsylvania’s Chesapeake Bay Restoration Effort, January 21, 2016, p. 11-12)

In addition to targeted efforts by DEP, EPA should also continue to complete targeted watershed assessments within Pennsylvania. DEP has previously acknowledged that EPA could pursue one of two approaches in order to further Pennsylvania’s efforts to gain compliance with existing regulatory requirements for farming operations. In the first approach, “EPA would directly contract for field work to assess rates of compliance with state and federal requirements of animal Ag operations in Pennsylvania.” (A DEP Strategy to Enhance Pennsylvania’s Chesapeake Bay Restoration Effort, January 21, 2016, p. 20) In the second approach, EPA field staff would support 3-6 targeted watershed inspection efforts per year in areas with the highest nutrient loading rates for agriculture. (A DEP Strategy to Enhance Pennsylvania’s Chesapeake Bay Restoration Effort, January 21, 2016, p. 20) The undersigned members of the Choose Clean Water Coalition recommend that EPA continue to undertake targeted watershed assessments in the Southcentral tier of the Commonwealth.

Installation of Effective and Efficient Best Management Practices

The Phase III WIP should focus restoration efforts at agricultural operations on best management practices that are effective and efficient at controlling the loss of nutrients and sediment. DEP has committed to “putting new high-impact, low-cost BMP projects on the ground in watersheds that are currently impaired by agriculture. . . .” (A DEP Strategy to Enhance Pennsylvania’s Chesapeake Bay Restoration Effort, January 21, 2016, p. 2) DEP has suggested that it is appropriate for cost share programs and funding to be targeted to the most effective and efficient BMPs. DEP has stated, and the undersigned members of the Choose Clean Water Coalition agree, that it would be most beneficial for the jurisdiction to focus on installation and implementation of the following agricultural BMPs: cover crops, tillage (no-till and conservation till), manure transport, streambank fencing, and buffers. (A DEP Strategy to Enhance Pennsylvania’s Chesapeake Bay Restoration Effort, January 21, 2016, p. 27)

Winter Manure Applications

DEP should make programmatic and policy changes necessary to prohibit winter manure applications. It is well recognized that winter manure applications are not an effective or efficient use of nutrients as plants are not actively growing. It is also well recognized that nutrients are more likely to become unavailable to plants via runoff or leaching if they are not applied close in time to when plants are actively growing. EPA has also stated that Pennsylvania’s Phase III WIP must include a discussion of programmatic, policy, legislative, and regulatory changes needed for “[r]estrictions on manure application during winter months to protect drinking water sources and ensure local and Chesapeake Bay water quality protection.” (EPA Expectations for Pennsylvania’s Phase III WIP, April 27, 2017, p. 3) DEP has also suggested that winter manure spreading should be prohibited unless it is conducted under an approved and certified nutrient management plan. (A DEP Strategy to Enhance Pennsylvania’s Chesapeake Bay Restoration Effort, January 21, 2016, p. 27)

Mandatory Reporting of Data

DEP should make programmatic and policy changes necessary to require all farming operations to submit reportable information related to farm practice and best management practices to DEP or the County Conservation District. DEP has stated that “[c]ontinued reliance on voluntary reporting and costly estimation techniques of indeterminate accuracy result in continued high levels of state and Federal expenditure . . . and seriously hamper the Commonwealth’s ability to make informed policy decisions on which to take effective action.” (A DEP Strategy to Enhance Pennsylvania’s Chesapeake Bay Restoration Effort, January 21, 2016, p. 6-7) DEP in partnership with the Penn State Agriculture and Environment Center completed a farm survey in which they were able to collect data on approximately 7,000 farms within Pennsylvania’s part of the Bay watershed. However, there are no immediate plans underway to repeat this effort. DEP has previously noted the importance of establishing a mandatory reporting requirement for all farming operations, even the smaller farms. DEP has stated the need to “[e]stablish reporting requirements for Ag E&S and Manure Management Plans in the agriculture sector, and provide the CDs with tools (Practice Keeper) to capture these data.” (A DEP Strategy to Enhance Pennsylvania’s Chesapeake Bay Restoration Effort, January 21, 2016, p. 12) All farms should be required to provide information or plans detailing how a farming operation is meeting DEP’s regulatory requirements under the Clean Streams Law. “The data collected, coupled with verification by inspection and compliance assurance activities, will allow the Commonwealth to gather reportable, Bay model-countable data and will result in real improvement in water quality in Pennsylvania, and in the Chesapeake Bay.” (A DEP Strategy to Enhance Pennsylvania’s Chesapeake Bay Restoration Effort, January 21, 2016, p. 7)

Failure by the Commonwealth to draft and implement a Phase III WIP could lead to serious consequences by EPA, including, but not limited to: targeted EPA enforcement and compliance assurance inspections; establishing finer scale wasteload and load allocations; additional load reductions from point sources; and, nitrogen and phosphorus numeric water quality standards. The Commonwealth must use the Phase III WIP process to meaningfully engage with local partners to draft a plan in which resources are targeted to where they can be efficiently and effectively implemented to achieve water quality improvement, both local and Bay-wide.

If you have any questions or would like to discuss these comments further, please contact Kim Snell-Zarcone at (717) 648-0602 or kim@choosecleanwater.org.

Thank you for the opportunity to comment on the draft regulations which were distributed on June 7. The undersigned organizations, including some of the over 200 member organizations of the Choose Clean Water Coalition, respectfully submit the following comments in response to the Maryland Department of the Environment’s (MDE) proposed regulations to establish a Nutrient and Sediment Trading and Offset Program.

The Choose Clean Water Coalition

Choose Clean Water works in the seven jurisdictions, Delaware, the District of Columbia, Maryland, New York, Pennsylvania, Virginia, and West Virginia that make up the Chesapeake Bay region. The coalition’s members range in size and scope from national to regional to the most local level, but share the vision of vibrant clean rivers and streams in all of the Chesapeake region’s communities. One of the main objectives of the coalition is ensuring the Chesapeake Bay pollution limits, the corresponding state Watershed Implementation Plans (WIPs) and broader Clean Water Act protections continue to lay the groundwork for clean water in the region. The Coalition is interested in programs that have the potential to create cost-effective achievement of the goals set forth in the Chesapeake Bay Total Maximum Daily Load (TMDL) and Maryland’s Watershed Implementation Plan (WIP). The Coalition recognizes that the nutrient credit trading in the Chesapeake Bay watershed could be a cost effective mechanism to meet a portion of the required TMDL reductions. However, improperly designed programs increase the chance of water quality degradation, which ultimately means failure to meet water quality goals.

Comments on Draft Regulations

We commend MDE for listening to many of the concerns of several of our members and other stakeholders in creating regulations to comment on rather than trying to establish a trading program simply relying on guidance. We urge MDE to include more details in the regulations and make some changes to improve the regulations in order to make a robust trading program that will not endanger water quality in the Bay or at the local level.

1. The regulations must adhere to the EPA technical memoranda on nutrient trading.

The Environmental Protection Agency (EPA) has developed a series of technical memoranda that provide details on EPA’s expectations for nutrient trading programs designed to meet the Bay TMDL target allocations.[1] Specifically, the technical memoranda elaborate on Appendix S and Section 10 of the TMDL.[2] These are not merely guidance, but reflect the fundamentally important “expectations” of EPA, the Chesapeake Bay Program (CBP) partner responsible for ensuring accountability in the TMDL implementation. As you know, if Maryland chooses to ignore the memoranda, it runs the risk not only of forcing EPA to object to permits and reject credits or offsets for use in meeting TMDL allocations, but also of losing credibility in the eyes of other partners and the public.

2. The draft regulations must require the use of a 2:1 uncertainty ratio for all trades involving nonpoint credit generators.

The pollution loads from nonpoint sources of pollution, which by definition lack discreet “point” source outfalls, are very difficult to measure. When these nonpoint sources implement Best Management Practices (BMPs) to reduce pollution loads, the reductions are equally difficult to measure. In practice, these loads and pollution reductions are never measured, but are instead estimated. Nutrient credits generated by nonpoint sources are therefore inherently uncertain.

Adding to that basic uncertainty is the fact that most estimates of BMP effectiveness are generated from carefully controlled research experiments – not real-world demonstrations. The National Research Council (NRC) observed that:

BMP efficiencies are often derived from limited research or small-scale, intensive, field-monitoring studies in which they may perform better than they would in aggregate in larger applications . . . Thus, estimates of load reduction efficiencies are subject to a high degree of uncertainty.[3]

Note that the NRC authors are suggesting that the uncertainty is largely in one direction—BMP efficiencies are likely to overestimate actual nutrient removals. Indeed, the authors go on to say that “[p]ast experience . . . has shown that credited BMP efficiencies have more commonly been decreased rather than increased in the light of new field information.”[4]

In other words, BMP effectiveness estimates tend to overestimate pollution reductions. The Chesapeake Bay Program has modified certain BMP effectiveness estimates to address some, but not all, of this bias (to “remove unwarranted optimism”).[5] There has been some confusion on this point. For example, in 2011 the Maryland Department of Agriculture (MDA) stated that “[a]ny uncertainty associated with [BMPs] has already been taken into account by the CBP in the adoption of the stipulated efficiency.”[6] This is incorrect. Not all BMPs have been adjusted as described above, and not all sources of uncertainty have been addressed. According to EPA:

The CBP partnership BMP effectiveness values vary across the Chesapeake Bay watershed for conditions such as implementation date, growth rate of crops, and physiographic region. These adjustments generate BMP effectiveness values that are unbiased and realistic but not necessarily conservative because they were established using realistic estimates for load reductions that do not reflect additional sources of uncertainty, especially hydrological variability and operation and maintenance over the lifetime of BMPs. The uncertainty ratio recommended in this technical memorandum is designed partially to account for those additional sources of uncertainty.[7]

This means that there is a reasonable probability that a BMP will not generate the pollution reductions that it is given credit for. In order to avoid a net increase in pollution loads, EPA expects the states to use an uncertainty ratio “of at least 2:1” for trades between nonpoint credit generators and point source credit buyers.[8] In other words, a credit buyer hoping to offset one pound of new nitrogen load would have to purchase credits worth two pounds of nonpoint nitrogen. EPA allows for two possible exceptions to this policy. The first is where “direct and representative monitoring of a nonpoint source is performed at a level similar to that performed at traditional NPDES point source.”[9] The second is where land conservation is made “permanent” through a conservation easement or other deed attachment.[10]

In general, however, Maryland is required to apply a 2:1 ratio to all nonpoint-point trades. The draft regulation defines uncertainty ratios, but does not include any substantive language about them. We presume that this is an error in drafting – since MDE included a definition, we presume that the Department intended to include substantive language. Maryland’s most recent guidance manual[11] includes some language about uncertainty ratios, but misses the mark. Specifically, the manual requires a 2:1 uncertainty ratio for trades between nonpoint credit generators and “wastewater point sources,” but does not require a 2:1 ratio for trades between nonpoint credit generators and “stormwater point sources.”[12] This is an arbitrary distinction, and it is impermissible. The characteristics of the credit purchaser are irrelevant to the policy goal that a 2:1 uncertainty ratio is intended to serve. The uncertainty ratio is there to ensure that credits do not overestimate the pollution reductions achieved by the credit generator.

Virginia has adopted an uncertainty ratio requirement that comports with the TMDL and EPA’s expectations:

Credits used to offset new or increased nutrient loads under this subdivision shall be:

Subject to a trading ratio of two pounds reduced for every pound to be discharged if certified as a nonpoint source credit by the board pursuant to § 62.1-44.19:20 of the Code of Virginia. On a case-by-case basis the board may approve nonpoint source to source trading ratios of less than 2:1 (but not less than 1:1) when the applicant demonstrates factors that ameliorate the presumed 2:1 uncertainty ratio for credits generation by nonpoint sources such as:

When direct and representative monitoring of the pollutant loadings from a nonpoint source is performed in a manner and at a frequency similar to that performed at VPDES point sources and there is consistency in the effectiveness of the operation of the nonpoint source best management practice (BMP) approaching that of a conventional point source.

When nonpoint source credits are generated from land conservation that ensures permanent protection through a conservation easement or other instrument attached to the deed and when load reductions can be reliably determined.[13]

MDE should adopt the same language and apply it to all trades and offsets.

Furthermore, the same logic should apply to all trades involving nonpoint credit generators, including the sale of credits to nonpoint credit purchasers. Again, the uncertainty ratio is there to ensure that credits do not overestimate the pollution reductions achieved by the credit generator. The characteristics of the credit purchaser are irrelevant.

In short, MDE must require the use of a 2:1 uncertainty ratio for all trades involving nonpoint nutrient credits, including but not limited to trades between nonpoint credit generators and “stormwater point sources.”

3. Use a retirement ratio to ensure net improvement to water quality.

Trading programs must result in actual net improvements to water quality. The current draft regulations do not include a retirement ratio. They include a “reserve ratio”, which is not the same thing, because that does not ensure that there is a net reduction of pollution from any trade. This is sometimes called “additionality”. This is an EPA “expectation” set forth in its Technical Memoranda on Components of Credit Calculation.[14] We urge MDE to include a retirement ratio similar to the one that used to be a part of Maryland’s draft trading policy. MDE should require that 5% of credits generated by point sources, and 10% of credits generated by nonpoint sources, be “retired.” An earlier iteration of MDA’s nutrient trading policy included the following “fundamental principle”:

Trades must result in a net decrease in loads. To ensure this net decrease is achieved, 10 percent of the agricultural credits sold in a trade will be “retired” and applied toward Tributary Strategies or TMDL goals. The buyer will retire the credits following the transaction, and this determination should be reflected in the buyer/seller contract.[15]

At the January 8, 2016 trading symposium, MDE stated that a percentage of credits will be retired for the sake of net water quality benefit. We agree with this policy and urge MDE to ensure that these levels are included. As noted above, the current draft omits the retirement ratio and instead includes a ‘reserve ratio.’ The reserve ratio alone is insufficient for two reasons. First, it is not a retirement ratio, and does not ensure a net reduction in pollution loads. Second, at the end of the year there is nothing preventing MDE from distributing the reserved credits to noncompliant dischargers. This means that not only is there zero net pollution benefit, but there is also an incentive to polluters to fall short of their pollution reduction targets. We have no objection to applying a reserve ratio if MDE also incorporates the appropriate retirement ratio.

We recommend the following in words or substance:

“A retirement ratio will be applied to each trade, and represents the percentage of the total purchased credits to be retired towards net water quality benefit. The retirement ratio is 1.05 for point source credits and 1.1 percent for nonpoint credits. This means that credit purchasers will have to purchase 1.05 pounds of point source credits, or 1.1 pounds of nonpoint credits, before accounting for any other trading ratios, to offset one pound of pollution.”

4. Ensure that trading does not cause degradation of local waters or pollution hotspots.

We strongly support the intent of the language in section .05.B. The TMDL and EPA’s technical memorandum on local water quality both prohibit trades that would cause or contribute to local water quality impairments, including any exceedances of water quality standards.[16] We commend MDE for limiting trading to credits generated upstream of where the water discharge reaches impaired waters as a good practice to help ensure compliance with local water quality standards. However, section .05.B.1, as written, is too narrow and is inconsistent with section .05.B, the TMDL, and EPA’s technical memorandum. Section .05.B. prohibits trades that would cause or contribute to an impairment or to an exceedance of water quality standards. We would strongly urge MDE to consider language that would avoid creating pollution hot spots for local communities by requiring all trades be executed within a small watershed and where the credit generator is upstream of the purchaser. At a minimum, however, we would request the following.

Please change:

“Where necessary to ensure compliance with local water quality standards, the exchange of credits in an area within the Chesapeake Bay Watershed subject to an approved local TMDL for total nitrogen, total phosphorus, or total suspended solids with allocations more stringent than the Chesapeake Bay Watershed TMDL shall be limited to those credits generated upstream of where the discharge reaches impaired waters.”

To:

“Where necessary to ensure compliance with local water quality standards and to prevent local water quality impairments, the exchange of credits in areas where a credit purchaser may cause or contribute to a violation of water quality standards, an impairment identified by the Department under in the most recent biennial report, or a violation of a local TMDL, shall be limited to credits generated upstream of where the credit purchaser’s discharge reaches impaired waters.”

We also urge MDE to ensure that permittees, particularly MS4s, do not use trading to meet the entirety of their permit. Trading should not be allowed to offset more than 50% of a permittee’s pollution reduction requirements. This would ensure that local waters are not significantly degraded and also ensures that MS4s do not abandon all stormwater and polluted runoff reduction efforts within the boundaries of their jurisdictions.

5. Include additional details on enforcement: The regulations should ensure greater enforcement against fraud in the program and repeat offenders.

Since nutrient trading creates a host of new enforcement issues, the draft regulation must add significantly more detail on enforcement. Section 11 should outline specific enforcement measures that MDE would pursue in response to credit failure, willfully fraudulent trading or verification misrepresentations, and repeat offenders.

To begin with, the regulation should clearly and comprehensively state that credit purchasers are responsible for credit failure, and that a credit failure is a permit violation subject to Clean Water Act and state law enforcement. Section .08.A.1(d) states that “in the event of a default in a trade contract or the invalidation of credits, the MS4 permittee using those credits remains responsible for complying with MS4 permit requirements that would apply if the trade had not occurred.” This is a step in the right direction, but it does not go far enough and only applies to MS4 credit purchasers. The draft regulation should expand this language to state that permittees are subject to enforcement for permit violations in the cases of credit default, and apply that language to all credit purchasers.

Enforcement provisions should recognize that there will likely be minor infractions, or a failure of a BMP performance, that can be corrected expeditiously. They should authorize administrative compliance orders to address these and other violations, coupled with penalties for failure to comply.

In addition, we recommend that the regulations expand the enforcement sanctions for willfully fraudulent trading or verification, and for repeat offenders. A noncompliant verifier working with a willful counterfeiter of credits could jeopardize the integrity of the entire trading system and the health of the Chesapeake Bay. Greater enforcement mechanisms are necessary to reduce the temptation to falsify credit verification reports, particularly when the verifiers are third party entities.

Both the MDA and MDE should have the authority to impose on any noncompliant party a ban from the nutrient trading system of up to 10 years, as well as a lifetime ban for the most serious and/or repeat offenders. The MDA should also refer cases of fraud to the State Attorney General to take appropriate action under the state's general civil and criminal fraud laws.

Finally, we recommend the Department include a definition of “significant noncompliance” since this term is used in .04E.(1) to describe one basis for becoming ineligible to participate in the trading program.

6. The draft regulation must include more detail on certification and verification of credits

The draft regulation currently includes very little detail on verification, despite the fact that Maryland has adopted a comprehensive Best Management Practice verification plan.[17] Much of the verification under this plan will be done by MDA, but the plan also assigns numerous responsibilities to MDE (e.g., stormwater BMP and wastewater treatment plant verification, review and submittal to the Chesapeake Bay Program of MDA verification data, etc.). To the extent that the BMP verification plan may overlap with the nutrient trading regulation, MDE should incorporate the overlapping policies and language.

In addition, section .05.E(5) suffers from both substantive and drafting problems. First, section .05.E(5) states that “permanent credits are available in perpetuity and . . . may be verified annually.” This suggests that permanent credits may not be verified at all. Nothing is truly “permanent,” and MDE must prescribe some form of follow-up verification for any practice used to generate credits. Maryland’s BMP verification plan lays out a schedule for initial and follow-up inspections for virtually every kind of credit-generating practice.[18] EPA’s technical memorandum on verification simply says that the Agency expects “all credit generating projects and practices to be verified on an annual basis.”[19] MDE must ensure that the draft regulation is consistent with that plan.

Section .05.E(5) goes on to exempt two types of practices from the preceding language, but because the preceding language includes three clauses, it is unclear what the practices in .05.E(5)(a) and (b) are exempted from. If the language exempts (a) and (b) from the “may be verified annually” clause, then MDE is effectively stating that these two practices – converting septic systems to wastewater treatment plant hookups and land conversions with deed restrictions – cannot be verified after initial project completion. It makes no sense for MDE to tie its hands in this way. Since .05.E(5) does not require anything beyond initial verification on project completion, there is no reason to exempt any practices, and the word “except” and parts .05.E(5)(a) and (b) should be deleted.

7. Credit timing: adhere to EPA’s expectations

The draft regulation presents a conflicted set of requirements for the use of credits over time. On one hand, credits are generally valid for one year and cannot be banked for future years – a good policy (section .05.E(4)). On the other hand, the draft regulation contemplates “permanent credits” (.05.E(5)), and “[p]ermittees are required to secure credits in perpetuity or the term of their permit,” (section .05.E(6)), or for up to 20 years (section .07.A.(3)(b)(ii)). The draft regulations fail to explain how a permittee could “secure” credits for 20 years (or in perpetuity) when most credits are annual and expire a year after they are created.

This issue requires careful thought on MDE’s part. The Department may wish to require that long-term credit purchases be limited to long-term credit generating practices such as land conversion with deed restrictions. Alternatively, the Department will have to provide a mechanism by which permittees can “secure” credits in a way that the Department can validate and track. A simple contract between a permittee and a broker, where the broker promises to find annual credits every year for the next 20 years, is plainly insufficient.

Unfortunately, EPA has provided very little guidance on this issue, but the agency does expect that “[t]he procurement of credits should be documented in the permit, the fact sheet, and the administrative record. This includes documented assurances in place to show that credits have been secured from a project and/or practice certified by a person properly authorized to do so for the duration of the authorization to discharge.”[20]

MDE must adhere to EPA’s expectations in the following ways: (1) It must revise the draft regulation to specify that “securing” credits means lining up credits from specific projects and/or practices (not from brokers), and (2) it must include how the credits were secured in the relevant permit, fact sheet, and administrative record.

As written, the draft regulation would allow for “multiple facilities in a watershed” to form an association and obtain a single permit (a “bubble permit”) as co-permittees. This provision is not authorized under the Clean Water Act and has no basis for inclusion in nutrient trading regulations.

Moreover, even if a way could be found todesign a “bubble permit” that is consistent with the CWA, we have serious concerns about the impact of bubble permits, which create a laundry list of potential problems for local water quality, transparency, accountability, and enforcement, and must be avoided. For example, as drafted, the term “watershed” is not defined and could allow permittees anywhere within the Chesapeake Bay watershed to combine their discharge limits. Worse, the draft regulation establishes no restrictions at all on the number of owners forming an association. Theoretically, a single “bubble permit” could be written for all nutrient dischargers in Maryland’s Chesapeake Bay watershed.

Even a bubble permit involving a limited number of facilities poses significant permit-writing and enforcement questions. How will MDE ensure that there are no local water quality impacts at all locations? As a preliminary matter, how will MDE even conduct a “reasonable potential” analysis, which it must do pursuant to the Clean Water Act, to determine whether water Quality-Based Effluent Limitations are required? Will co-permittees report their discharges individually, as a group, or both? These are just a few of the questions that are not addressed in the draft regulations. MDE needs to initiate an entirely new rulemaking process and create a new set of regulations to address all of the complex issues and potentially dangerous consequences of bubble permitting. It is inappropriate to address this issue with five lines of text in an unrelated regulatory proposal that contains no reference to bubble permits in the Statement of Purpose.

9. Baselines must be better defined

Section .07.B(2)(d) is unclear. Subsection (d)(i) begins with “If greater than 6,100 pounds per year total nitrogen load cap and 457 pounds per year total phosphorus load cap.” It is unclear what is (or is not) greater than these load caps. It may be baselines, but it may also be “previously assigned 2004 Point Source Tributary Strategy” goals (section .07.B(2)(d)(i)). MDE should clarify.

That section goes on to describe how the baseline can be “no more than 50 percent of the amount that is above [the load caps].” This is unclear mathematically. Why would the baseline be half of the excess above the load caps? We strongly encourage MDE to clarify this language as well.

Furthermore, section .07.B(4) suggests that the baseline for significant industrial dischargers will be “based on a combination of historical performance levels, the amount of loading reductions already achieved since the initial baselines established in 1985, and establishment on a case-by-case basis of additional potential loading reductions.” This language is ambiguous and appears to be a statement of purpose, but is not appropriate in the context of a regulation. MDE should settle on a baseline definition and provide a precise statement for the benefit of the regulated community and public.

The baseline provisions must be rewritten to ensure full compliance with EPA’s Technical Memorandum on Establishing Offset and Trading Baselines (February 2, 2016). In particular, for any point source discharger, baseline must include compliance with any technology based requirements and with any Water Quality Based Effluent Limitations (WQBELs) established by the permit. For nonpoint source dischargers, baseline requirements must ensure compliance with any applicable load allocation “for the appropriate sector [of which the NPS is a member]…and…needed to facilitate improved environmental compliance with WQS.”[21] The load allocated to an individual NPS within a sector should be calculated to ensure that that source is doing its fair share to contribute towards achieving compliance with any applicable WQS so as to avoid inequitable burdens being placed on members of the sector whose baselines are established at a later date. While many if not most baselines will be established by MDA under its regulations, MDE will likely be called on to establish some of these, and its regulations therefore must include appropriate provisions to enable it to do so.

10. Do not allow Capacity Credit generation or Trading

The Maryland Water Quality Trading Advisory Committee rightly reached a decision that wastewater treatment plants should not be allowed to sell credits representing the extra capacity of their wastewater treatment plants. Not only does it not comport with Clean Water Act principles and the fundamentally important principle of additionality embedded in the TMDL,[22] it can also flood the market with ‘free’ credits that interfere with the creation of the viable marketplace that MDE is trying to create.

Several MS4s have already declared the intent to use this allowance as a loophole to get out of financing new stormwater projects if it becomes available. In subparagraph .08A.(1)(b)(iv), the regulations allow an MS4 to purchase capacity credits if other sources of credit generation do not “reasonably” meet the demand. This provision is both ambiguous and inappropriate. The entire purpose of these regulations is to create the rules for the marketplace. Not only does this open-ended provision not precisely define what is “reasonable,” it represents a very clear and bold loophole that could sabotage the marketplace and, more importantly, all of the past and present efforts to meet our commitment to the Bay TMDL and attain local water quality standards. By making capacity credits the trade of last resort, the Department is in essence declaring that (a) capacity credits are not an appropriate or effective means of reducing pollution; (b) the purchase of these undesirable credits is preferable to stimulating demand for new and effective pollution reduction projects and practices through market signals (higher prices); and (c) that giving pollution allowances away is preferable to the enforcement of existing pollution limits set out in Clean Water Act permits.

Wastewater treatment plants should only be able to generate credits if they invest in new projects or undertake other new initiatives that create additional pollution load reductions which would not otherwise occur. Credits fail this additionality test if, for example, they are not set at a baseline consistent with the nutrient load concentrations envisioned in state law (3 mg/L for nitrogen; and .3 mg/L for phosphorus) and created by wastewater treatment plant upgrade projects that have already been completed and financed with taxpayer dollars. We strongly urge MDE to create clear eligibility requirements for credit generation by wastewater treatment plants. These criteria could include, for example, the submission by the facility of an application created by the department that allows the proposed credit generator to describe what additional capital projects or operational changes the facility will undertake, an estimate of the load reduction to be achieved, and the formula that the applicant will use in this estimate and that the department will use to ultimately certify the number of credits created. The formula must ensure that credits are only certified for reductions that are based on (1) new or additional projects, investments, or actions taken; (2) reductions below the “enhanced nutrient removal” load concentration levels set by the General Assembly and codified in Title 9, Subtitle 16 of the Environment Article; and (3) load concentration levels which are, in fact, lower than historic levels for the facility.

11.Increase Transparency: Provide an opportunity for the public to comment on an application for credit approval when MDA or MDE receives a completed Certification and Registration Form.

The regulation needs to include more opportunities for transparency into the nutrient trading program. The MDA regulations give some guidance to what MDE should include in the regulations. These regulations stated in Sections 07.B and C the essential requirements that must be met before a credit can be certified. Section 07.F of those regulations specifies that credits may be “certified” once those requirements are met, and Section 07.G says that following approval each credit shall be given a “unique registration number” and registered. This or similar language should also be included for other nonagricultural credit generation.

There are also additional components MDE should add to this regulation. After credits are certified, include a system for tracking each credit, as required by the EPA Technical Memorandum on Certification and Verification of Offset and Trading Credits in the Chesapeake Bay Watershed.[23]

Furthermore, public notice and comment should be required when the MDA or MDE receives a completed Certification and Registration Form, along with the other documents and information required by Sections 07.A and .B. of the MDA trading generation regulations. Without the publication by the department of an announcement of the credit request and a reasonable period for comments, there is no meaningful transparency in the program. Requiring public notice and comment is the only opportunity for interested parties to review the proposed credit(s) and supporting documentation and evaluate and comment on whether: (1) the applicant has properly complied with baseline requirements, (2) the requirements that the Nutrient Management Plan and Soil Conservation and Water Quality Plan be fully implemented are demonstrated, (3) the effectiveness and likely duration of the credits have been properly calculated, (4) whether calculations requiring application of the Maryland Nutrient Trading tool have been properly performed and documented, and (5) the other information required by Section 07.A and B has been provided by the applicant.

In addition, MDA and MDE should both receive a copy of the application no later than the date of the public announcement. MDE has an important interest in any measure which could affect achievement of TMDL goals and water quality standards. In most, if not all cases, any credit purchased and used by a point source discharger will be incorporated into an NPDES permit, which is issued by MDE. In cases where a credit application is submitted to MDA, MDE should have an opportunity at this time to review the credit application and provide comments to MDA. In the event MDE believes there is anything unsatisfactory in the credit, the correction should be addressed before the credit has been approved, registered, purchased, and included with a permit application to MDE.

The MDA regulations in Section 08.D appear to recognize the important role played by MDE because they require that MDE be provided with a copy of the verifier’s report generated after an annual verification inspection. However, MDE regulations should also require the original application be shared with MDE as well to assist in verification.

These important elements of the process can be effectively accomplished by adding a new subsection C under Section .07. The existing Subsection 07.C should then be designated as 07.D. The new Section 07.C should provide, in words or substance, as follows:

C. Promptly after a determination by MDE or MDA that an application for approval and registration of one or more credits includes all of the documentsspecified in this Section 07, and Sections 08, 09 and 10, as applicable,, the Department shall post on its website an announcement ofthe application and identifying a location where the application and related documents can be inspected and copied, and allowing a time for public comments on the application of not less than 30 days following the date of publication of the announcement. In addition, not later than the date of publication, MDE or MDA, as appropriate, shall provide the other with a copy of the application and supporting information.

Finally, the Department should get copies of disputed information reports.Section 09.E of the MDA regulations allows the owner or operator of a facility to “dispute information in” the verifier’s report by filing a statement of written concerns with the MDA within 30 days of his or her receipt of the report. MDE should require that a copy of the written concerns be provided to MDE at the same time as MDA. MDE will have received the verifier’s report, and should be advised if there is a challenge to it by the owner/operator.

We appreciate the opportunity to submit these comments. We would be pleased to discuss any aspect of them and answer any questions. Please contact Chante Coleman, director of the Choose Clean Water Coalition, with any questions, comments, or concerns.